2006 Utah Code - 31A-21-104 — Insurable interest and consent.

     31A-21-104.   Insurable interest and consent.
     (1) (a) An insurer may not knowingly provide insurance to a person who does not have or expect to have an insurable interest in the subject of the insurance.
     (b) A person may not knowingly procure, directly, by assignment, or otherwise, an interest in the proceeds of an insurance policy unless that person has or expects to have an insurable interest in the subject of the insurance.
     (c) Except as provided in Subsections (6), (7), and (8), any insurance provided in violation of this Subsection (1) is subject to Subsection (5).
     (2) As used in this chapter:
     (a) (i) "Insurable interest" in a person means:
     (A) for persons closely related by blood or by law, a substantial interest engendered by love and affection; or
     (B) in the case of other persons, a lawful and substantial interest in having the life, health, and bodily safety of the person insured continue.
     (ii) Policyholders in group insurance contracts do not need an insurable interest if certificate holders or persons other than group policyholders who are specified by the certificate holders are the recipients of the proceeds of the policies.
     (iii) Each person has an unlimited insurable interest in the person's own life and health.
     (iv) A shareholder or partner has an insurable interest in the life of other shareholders or partners for purposes of insurance contracts that are an integral part of a legitimate buy-sell agreement respecting shares or a partnership interest in the business.
     (v) Subject to Subsection (9), an employer or an employer sponsored trust for the benefit of the employer's employees:
     (A) has an insurable interest in the lives of the employer's:
     (I) directors;
     (II) officers;
     (III) managers;
     (IV) nonmanagement employees; and
     (V) retired employees; and
     (B) may insure the lives listed in Subsection (2)(a)(v)(A):
     (I) on an individual or group basis; and
     (II) with the written consent of the insured.
     (b) "Insurable interest" in property or liability means any lawful and substantial economic interest in the nonoccurrence of the event insured against.
     (c) "Viatical settlement" is as defined in Section 31A-36-102.
     (3) (a) Except as provided in Subsection (4), an insurer may not knowingly issue an individual life or accident and health insurance policy to a person other than the one whose life or health is at risk unless that person, who is 18 years of age or older and not under guardianship under Title 75, Chapter 5, Protection of Persons Under Disability and Their Property, has given written consent to the issuance of the policy.
     (b) A person shall express consent:
     (i) by signing an application for the insurance with knowledge of the nature of the document; or
     (ii) in any other reasonable way.
     (c) Any insurance provided in violation of this Subsection (3) is subject to Subsection

(5).
     (4) (a) A life or accident and health insurance policy may be taken out without consent in a circumstance described in this Subsection (4)(a).
     (i) A person may obtain insurance on a dependent who does not have legal capacity.
     (ii) A creditor may, at the creditor's expense, obtain insurance on the debtor in an amount reasonably related to the amount of the debt.
     (iii) A person may obtain life and accident and health insurance on an immediate family member who is living with or dependent on the person.
     (iv) A person may obtain an accident and health insurance policy on others that would merely indemnify the policyholder against expenses the person would be legally or morally obligated to pay.
     (v) The commissioner may adopt rules permitting issuance of insurance for a limited term on the life or health of a person serving outside the continental United States who is in the public service of the United States, if the policyholder is related within the second degree by blood or by marriage to the person whose life or health is insured.
     (b) Consent may be given by another in a circumstance described in this Subsection (4)(b).
     (i) A parent, a person having legal custody of a minor, or a guardian of a person under Title 75, Chapter 5, Protection of Persons Under Disability and Their Property, may consent to the issuance of a policy on a dependent child or on a person under guardianship under Title 75, Chapter 5, Protection of Persons Under Disability and Their Property.
     (ii) A grandparent may consent to the issuance of life or accident and health insurance on a grandchild.
     (iii) A court of general jurisdiction may give consent to the issuance of a life or accident and health insurance policy on an ex parte application showing facts the court considers sufficient to justify the issuance of that insurance.
     (5) (a) An insurance policy is not invalid because the policyholder lacks insurable interest or because consent has not been given.
     (b) Notwithstanding Subsection (5)(a), a court with appropriate jurisdiction may:
     (i) order the proceeds to be paid to some person who is equitably entitled to the proceeds, other than the one to whom the policy is designated to be payable; or
     (ii) create a constructive trust in the proceeds or a part of the proceeds on behalf of such a person, subject to all the valid terms and conditions of the policy other than those relating to insurable interest or consent.
     (6) This section does not prevent any organization described under 26 U.S.C. Sec. 501(c)(3), (e), or (f), as amended, and the regulations made under this section, and which is regulated under Title 13, Chapter 22, Charitable Solicitations Act, from soliciting and procuring, by assignment or designation as beneficiary, a gift or assignment of an interest in life insurance on the life of the donor or assignor or from enforcing payment of proceeds from that interest.
     (7) An insurance policy transferred pursuant to Chapter 36, Viatical Settlements Act, is not subject to Subsection (5)(b) and nothing else in this section shall prevent:
     (a) any policyholder of life insurance, whether or not the policyholder is also the subject of the insurance, from entering into a viatical settlement;
     (b) any person from soliciting a person to enter into a viatical settlement;
     (c) a person from enforcing payment of proceeds from the interest obtained under a

viatical settlement; or
     (d) a provider of viatical settlements, a purchaser of a viatical settlement, a financing entity, a related provider trust, or a special purpose entity from executing any of the following with respect to the death benefit or ownership of any portion of a viaticated policy as provided for in Section 31A-36-109:
     (i) an assignment;
     (ii) a sale;
     (iii) a transfer;
     (iv) a devise; or
     (v) a bequest.
     (8) Notwithstanding Subsection (1), an insurer authorized under this title to issue a workers' compensation policy may issue a workers' compensation policy to a sole proprietorship, corporation, or partnership that elects not to include any owner, corporate officer, or partner as an employee under the policy even if at the time the policy is issued the sole proprietorship, corporation, or partnership has no employees.
     (9) The extent of an employer's or employer sponsored trust's insurable interest for a nonmanagement and retired employee under Subsection (2)(a)(v) is limited to an amount commensurate with the employer's unfunded liabilities.

Amended by Chapter 81, 2003 General Session